Recently in Grains Sector Category

Viterra Australia - What Might Happen Down Under?

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Earlier this year Viterra announced its intention to acquire ABB Grain Ltd. of Australia. Last week ABB Grain shareholders voted 83% in favour of removing the shareholder cap from their constitution; the removal allows Viterra to move another step towards completing a $1.6 billion takeover of ABB Grain. With the purchase of ABB Grain, Viterra is set to become a major grain marketing company with sourcing in two hemispheres; together Australia and Canada account for 37% of exports of wheat, barley and canola. The Australian Broadcasting Corporation (ABC) recently interviewed me about the Viterra/ABB Grain merger. The following are some of my thoughts.

Just Fiddlin...? (Part 2)

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Last week's Illative Blog entry (see link) highlighted three issues that we think are critically in need of examination and analysis. This week we examine three additional issues, followed by a discussion of why the capacity to analyse these issues is limited.

Volatility, Uncertainty and...

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In a recent Illative Blog posting, Richard Gray asked the question "Is this current price peak in grain prices just another blip in the commodity cycle or has something changed?" He then goes on to argue that the high prices might last longer than has usually been the case because of three factors: (1) growing economies in China and India; (2) Hubbert's Peak; and (3) U.S. biofuel policy. The purpose of this posting is to look at what might be in store for agriculture if the current situation of high grain demand and low stocks prevails for some period of time.

Will the boom last?....Maybe.

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Whenever crop prices rise analysts are often asked to predict how long the rise will last. Making price forecasts involves looking at past trends, current drivers and commodity price cycles. Commodity price cycles typically follow the pattern of long periods of low prices with short price peaks in between the price troughs. Strong prices are short-lived because high prices encourage investment, which increases production, resulting in an oversupply and subsequent price decline. Is this current price peak just another blip in the commodity cycle or has something changed? I would argue these high prices might last longer because of three factors in particular: (1) growing economies in China and India; (2) Hubbert's Peak, and; (3) U.S. biofuel policy.

Challenges from increased grain prices

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Current grain prices are bringing genuine smiles to the face of many a Prairie grain producer. It is good to see grain farmers with such optimism. They have faced a number of financially difficult years and now they have some good prospects. How long this will last, no one knows. If you had a chance to examine last week's posting you would have read that this period of high grain prices has been forecasted to last anywhere from two to ten years, depending on which expert you ask. Let's hope it is for a while.

Many Prairie grain farmers have received substantial government transfers in previous years. I was one who argued that the government should support grain farmers, an argument not appreciated in all quarters. Hopefully the industry will evaluate what impact, good and bad, the past transfers had on the grains sector.

While the grains sector is experiencing good times financially it is important to address the secondary challenges that come about as grain prices rise. Keeping these effects in mind may help the agriculture industry make the most of the current opportunity. Some of the secondary challenges are local, some national, and some international.

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